Asia stocks rally on Fed rate comments

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HONG KONG: Comments from top Federal Reserve officials suggesting a US interest rate rise is still likely this year pushed the dollar and Asian stocks higher on Tuesday, as the Fed sought to ease concern about the state of the global economy.

Another rally in Shanghai also bolstered confidence, with the index seeing a third straight day of gains. But the Asian Development Bank (ADB) flagged concerns about China’s growth, saying it would act as a drag on regional expansion this year.

World markets had tumbled on uncertainty about the global outlook after the US central bank on Thursday delayed announcing a rise, with its head Janet Yellen citing the threats caused by China’s faltering economy as a key reason.

The news sparked fears about the global outlook and about the strength of the US economy itself, which has been steadily getting back on a recovery track.


However, in an attempt to temper the impact of the news, several regional Fed presidents have since sought to reassure dealers, saying they thought the US was in a fit enough state to see a first rate rise by year-end.

Fed Bank of Atlanta president Dennis Lockhart said despite recent volatility in world markets—which followed China’s surprise yuan depreciation in August—he was still confident of a rate lift-off before 2016.

“As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment,” he said in a speech in Atlanta. “I am confident the much-used phrase ‘later this year’ is still operative.”

His comments were in line with those of two other presidents who at the weekend put the case for an increase.

All three main indexes on Wall Street ended higher Monday, as did the dollar.|

On Tuesday the dollar was at 120.10 yen compared with 119.93 yen in Asia Monday. The greenback was also higher against regional emerging currencies.

South Korea’s won slipped 0.38 percent, the Thai baht eased 0.20 percent, the Taiwan dollar retreated 0.47 percent and the Malaysian ringgit was 0.15 percent lower. Singapore’s dollar lost 0.16 percent.

The euro weakened against the dollar and yen as the European Central Bank contemplates widening its stimulus program to try to boost the eurozone economy.

AFP

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